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Vietnam - New regulations for labour subleasing

03 May 2013

The Vietnamese Labour Code has been amended to recognise the practice of labour dispatch, where workers are employed by one company and sent to work in another, to come into effect starting Wednesday 1 May.

Labour dispatch, or subleasing, had been unregulated in Vietnam for at least 10 years, according to reports, mostly popular in industrial areas especially in the south, such as Ho Chi Minh City (HCM City), Dong Nai, Binh Duong and Can Tho provinces. The change was prompted by the need to address fluctuating demands in the labour market. According to Ngo Hoang, deputy director of the Labour Law Division at the Ministry of Labour, Invalids and Social Affairs, it was about time the change happen as "Viet Nam has never put labour subleasing in any of its legislative documents. It takes time to stabilise the market."

According to limited scale surveys conducted by the ministry and the International Labour Organisation in Vietnam between 2009 and 2011, HCM City led the country with 59 firms providing employee subleasing services, some of which had up to 2,000 employees. The service fees range between 15% and 25% of the employee's wages. The types of jobs vary from security guards and domestic workers to interpreters, marketing and sales staff, personnel managers and electrical engineers.

Yoon Youngmo, chief technical advisor on industrial relations for ILO Vietnam, said for many foreign enterprises this type of employment was an important part of their business practice in other countries.

"Most of these companies also have a global strategy of keeping the workers they employ directly to the minimum, relying on short-term dispatched labour during peak production periods," Youngmo said.

The amended Labour Code also introduces a pay equality requirement which is not dissimilar to that found in most of Europe: the dispatched workers must receive a salary at least equal to that of employees conducting similar work at the client business. In addition, the dispatch firm and the client must share responsibilities for occupational safety, health issues and compensation.

Furthermore, the new regulation also provides rules aimed at eliminating those illegal businesses that did not have the funds to pay their workers. From the 1st May, only companies with starting capital of VND 2 billion (approximately USD 95,200) and able to pay a VND 1 billion deposit (approximately USD 47,600) would be allowed to operate.

The ILO in Vietnam also suggested that dispatch workers were vulnerable to exploitation and a lack of social and employment security due to the nature and special characteristics of this employment pattern.

"The surveys in Viet Nam already found some real problems in labour subleasing services, including the timely payment of wage, overtime, working hours, leave, social insurance, which neither sending nor use companies want to take responsibility," Youngmo said.

The implementation decree also restricts labour subleasing to 17 occupation groups, such as interpreters, secretaries, drivers, security guards, which some believe is a "cautious" move by the Government.

Nguyen Kieu Linh, general manager at Manpower Viet Nam, said the Government must continue reassessing and evaluating the market demand and making relative adjustments but the new regulation was a first step to officially regulate firms licensed to provide the service.

"The labour market and job demand keep changing," Linh said "and we recognise that the Government is taking it slow in opening up the market for this type of labour supply. The challenge is to inspect and enforce the requirements."

According to Vinh Quoc Nguyen, senior attorney-at-law at Tilleke&Gibbins, a regional law firm in Thailand and Vietnam, the new labour subleasing regime would allow investors to overcome the difficulties that lay with long-term hiring by allowing them to accommodate for seasonal demand. 

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